Taxes on junk food improves the health of the poor, study

Taxes on soft drinks, alcohol and tobacco are a powerful response to rising rates of non-communicable diseases (NCDs) worldwide, according to the most comprehensive analysis to date of evidence on expenditure, behaviour and socio-economic status, published today in The Lancet.

Bringing together data from across the globe, the five papers present strong evidence that taxes on unhealthy products have the potential to produce major health gains among the poorest in society who are disproportionately affected by NCDs. The evidence helps counter fears that such taxes will necessarily disproportionately harm the poor.

Non-communicable diseases such as stroke, heart disease, diabetes, chronic respiratory disease and cancer are responsible for 38 million deaths each year, 16 million of these are among people aged under 70. The Sustainable Development Goal NCD target (SGD 3.4) is to reduce deaths from NCDs by a third by 2030 and promote mental health.

The Lancet Taskforce on NCDs and economics is a partner of the WHO’s Independent High-Level Commission on NCDs [2], and will be launched at the WHO NCD Financing meeting in Copenhagen (9-11 April).

In a linked Comment, American economist Larry Summers, who co-chairs the Task Force on Fiscal Policy for Health with WHO Global Ambassador for Non-communicable Diseases Michael R. Bloomberg, writes that the analysis provides more evidence to dispel notions that are outdated, misleading, or simply wrong, saying that it “helps clear the air over one of the most common obstacles to taxing the consumption of goods that kill us—namely, the argument that such taxes are regressive.” The Task Force on Fiscal Policy for Health is also a partner of the High-Level Commission.

Worldwide, non-communicable diseases are major drivers of poverty

High quality evidence from 283 international studies including data from India, China and Brazil, shows that low socio economic status is consistently associated with higher rates of non-communicable disease in low and middle income countries.

Furthermore, evidence from 66 international studies on 13 chronic diseases, concludes that NCDs place a substantially higher economic burden on low income households compared to higher income households, especially in the absence of health insurance. Uninsured patients experienced a 2-7 fold increase in the odds of catastrophic health spending compared with insured patients.

Even with protective health insurance, high levels of co-pays or a lack of coverage for specific treatments mean households can often experience catastrophic expenditure. In China, for example, 1 in 3 patients (37%) with stroke are impoverished from paying for medical treatment and even among people with health insurance, over half (53%) experienced financial catastrophe.

In a linked Comment, Dr Tedros Adhanom Ghebreyesus, Director General of the WHO, writes: “Every year, almost 100 million people are pushed into extreme poverty because of out-of-pocket health spending, and the costs of treating NCDs are a major contributor to this global scandal. Nobody should lack access to health services because they cannot afford to pay. Failing to provide adequate coverage for NCDs can widen inequities not only in health, but in all other social and economic domains.”

Taxes can produce major health gains for poorest in society

By analysing consumption patterns, expenditure and responsiveness to price changes across different income groups, the Taskforce provides a comprehensive analysis of existing data to help governments understand the potential impact of taxes, and inform whether their use is justified. The analysis is based on available data from 13 countries (Chile, Guatemala, Panama, Nicaragua, Albania, Poland, Turkey, Tajikistan, Tanzania, Niger, Nigeria, India and Timor-Leste).

Firstly, evidence shows that high income households generally consume more, and spend more, on alcohol, soft drinks and snacks, compared to low income households. Patterns for tobacco are less consistent. In India, for instance, wealthier households spent seven times more on alcohol and three times more on soft drinks and snacks compared to poorer households (see paper 4, figure 1 for full data).

Increased taxes on unhealthy products will therefore affect a larger number of high-income households than low-income households, meaning that the revenues generated by taxes will come disproportionately from high income households.

Tax policies can also be designed to influence this effect. Since high income consumers are more likely to buy more expensive beverages, especially alcohol, an alcohol policy based on unit price may be less of a burden on low income household, compared to a policy based on volume.

Secondly, as a proportion of total household expenditure, low income households tend to be more greatly affected by price changes compared to high income households, although the effect varies. The analysis also shows that low income households respond to price changes more readily than higher income households.

In the UK, the response to the possible introduction of a minimum price for alcohol was estimated to be 7.6 times larger in the poorest households, compared to the wealthiest. In Mexico, the introduction of a soft drinks tax resulted in an average of 4.2L less of soft drinks purchased per person, with a 17% decrease in purchases among lower income groups, and almost no change in higher income groups.

Indeed, the authors model the consequences of a 50% increase in the price of cigarettes in Lebanon (paper 4, table), and estimate that twice as many smokers in the poorest households would quit compared to the richest (20200 vs 11300), with a third (31%) of the increased tax revenue borne by the richest group and 7% by the poorest.

The authors point to examples of pro-poor programmes in Mexico where part of the revenue from the soft drinks tax is used to provide drinking water for children in public schools. In Thailand and the Philippines alcohol and tobacco tax revenues are ear-marked specifically for public health programmes (paper 4, appendix).

Prevention and treatment of non-communicable diseases is central to achieving many of the SDGs

Progress on non-communicable diseases will have a central role in determining the success of at least nine of SDG targets. The SDG target on NCDs (SDG 3.4) links to targets on reducing poverty (SDG 1), hunger (SDG 2), improving health and wellbeing (SDG 3), education (SDG 4), gender equality (SDG 5), work and economic growth (SDG 8), reduced inequalities (SDG 10), sustainable cities and communities (SDG 11), and sustainable production and consumption (SDG 12).

The economic benefits of investing in NCDs are considerable. Cardiovascular diseases account for nearly half of all NCDs deaths every year (17.7 million). The WHO package of ‘best buys’ includes interventions to reduce smoking and salt intake, and pharmaceutical interventions for the prevention and treatment of ischaemic heart disease and stroke.

The cost of implementing the package in 20 countries where 70% of cardiovascular deaths occur [6], is estimated at US$120 million for the period to 2030, equivalent to an additional US$1.50 per person. By 2030, this could prevent 15 million premature deaths, making it almost possible to achieve the SDG target of reducing premature mortality from NCDs by a third by 2030. Importantly, the return of investment is 5.6 for economic returns and 10.9 if social returns are also included.

Leave a Reply

%d bloggers like this: